Bitcoin isn't money — it's a 'censorship-resistant asset class'

Dana Byerlee, 33, of Santa Monica, prepares to use one of Southern California's first two bitcoin-to-cash ATMs, in Locali Conscious Convenience store in Venice, Los Angeles, California, June 21, 2014.
REUTERS/Lucy Nicholson
LONDON - Cryptocurrency Bitcoin isn't technically money in the full sense of the word, according to analysts at Bernstein.

While it allows transactions in a similar way to cash, Bitcoin is still just a "censorship-resistant asset class," out of the reach of state control and yet to form a part of the system of settlement and credit that defines money.

"Fiat money is still the final form of settlement - governments still collect taxes in fiat money and salaries are still paid in fiat money," a team of analysts led by Gautam Chhugani and Gaurav Jangale said in a note to clients on Wednesday.

"Thus, for now, Bitcoin has only emerged as a 'censorship resistant' asset class," Bernstein said.

The cryptocurrency, which is hovering around the $4,800 mark, is more like an economy run by its users rather than a threat to mainstream money.

"Bitcoin could be seen as virtual 'bearer cash' economy supported by a decentralized 'trustless' network - a new crypto economy with its own protocol or policy," Bernstein said. "The faith of its citizens- software developers, miners, investors, early individual and sovereign state adopters would drive the value of that network."

Bitcoin hit nearly $5,000 at the beginning of September, but quickly saw its price decline amid news of a crackdown in China and criticism from JPMorgan CEO Jamie Dimon. After bottoming out near $2,900 per coin on September 15, it has since rallied.

Bernstein said that money evolved as a system of keeping track of and clearing IOUs, rather than as a metal token in lieu of a barter system, a function that Bitcoin is yet to fulfil in the wider economy.